Mutual funds well poised to
grab a major chunk of bank deposits; banks taking depositors for a ride

AMANULLAH BASHAR
Apr 02 - 08, 2007

Najam Ali joined JS ABAMCO Limited
(formerly ABAMCO Limited) as Chief Executive Officer in 2004. Prior to his
present assignment, he was the Executive Director and Head of the Non-Banking
Finance Companies Department at the Securities & Exchange Commission of
Pakistan (SECP).

He carries an in-depth exposure to a
variety of products in asset management as he was involved in regulation,
monitoring and enforcement for mutual funds, leasing, housing finance,
investment banking. venture capital and discounting, companies while working
with SECP.

Najam also served for seven years as
the founding CEO of the Central Depository Company CDC), which is Pakistan's
only securities depository established by Citigroup, IFC and Pakistan's stock
exchanges, While at CDC, he also led the development of the National Clearing
and Settlement System, a centralized clearing system in Pakistan for all the
stock exchanges.

The success of these projects has laid
the foundation of a world class capital market infrastructure that has made it
possible to settle enormous trading volumes witnessed in recent years. It was
due to his leadership role in the development of Pakistan's Capital Market that
has earned him praise and recognition at the national level. His name has been
included in the list of Top Ten Capital Market Builders in Pakistan by a
contemporary financial magazine.

Najam carries the distinction of
working in various positions at the Fidelity Investment Banking including Group
Financial Controller and Head of Money and Capital Markets. He has also worked
with. Robson Rhodes, Chartered Accountants, a member firm of the RSM Group in
the UK to his professional career.

He serves on the Boards of Directors of
Askari Commercial Bank Limited. Pakistan Oilfields Limited, Dadex Eternit
Limited and has also previously been a director of the National Clearing Company
of Pakistan Limited and the Karachi Stock Exchange (Guarantee) Limited. He is
currently serving as the chairman of Mutual Funds Association of Pakistan.

Talking to Pakistan & Gulf
Economist, Najam Ali looked quite confident with the outlook of the Mutual Funds
in Pakistan with an interesting remarks that days are not far away when Mutual
Funds by offering more attractive and innovative products would be giving a real
tough time to the banks in Pakistan. While elaborating his point of view, Najam
was a little bit critical over the role of the banks and the way they are
treating with the depositors. In fact they are taking the depositors for a ride
without offering positive or reasonable returns to the depositors. In fact,
banks are mostly confined to lending and borrowing in general. Najam rightly
pointed the monotonous role of the banks, as generally speaking their interest
is to enjoy the pudding of lucrative spread between deposits and lending.

When National Saving Scheme drew his
attention towards attracting offers, Najam once again called it an intervention
on the part of the government, which sounds contradictory in a liberalized
financial regime. Actually, the market forces should determine the price or
return on investment instead of intervention by the government especially in the
case of NSS. Let the entire player compete in a healthy environment by providing
a level playing field to all the stakeholders, he observed.

ABAMCO

Looking comfortable as the chief of
country's most prestigious asset management company Najam proudly mentioned that
ABAMCO enjoys number one position in Pakistan, which has also been ratified by
PACRA rating of AM2+, no other Mutual Fund enjoys this rating, he said with a
sense of achievement.

JS ABAMCO is first and one of the
largest asset management companies in the private sector managing over Rs22,618
million as on June 30, 2006 in investments on behalf of institutions and
individuals. At present, ABAMCO is managing seven open-end and three closed-end
funds. The total net assets of the 7 open end and three closed end funds
amounted to Rs11,886 million and Rs10,732 million respectively on June 30, 2006.

Though the Mutual Fund sector was still
in its initial stage yet it is well poised to gain momentum especially on the
back of economic growth the country has witnessed during past three four years
and a strong outlook for future. He however drew a line between economic growth
and economic development. Explaining his point of view, Najam no doubt that
economy of Pakistan has been witnessing tremendous growth in recent years,
however when we look at economic development that is not so reassuring owing to
lack of direction and restructuring in the major economic sectors like
agriculture and manufacturing sectors except automobile and telecom sectors
which have shown noticeable development.

While taking stock of economic growth
in Pakistan, Najam was of the views that growth starts taking place in our
country whenever our relations with the United States and other developed
countries in the West are congenial which gives a pattern that our economy is
more politically based rather than knowledge and skill based economic
development.

Coming back to the performance of
different products in Mutual Fund sector Najam said that actually it is the
market demand, which sets the way for the fund managers. In this backdrop,
currently there is a growing interest and demand in Islamic or Shariah complaint
financial products. This area is taking shape in Pakistan as well as. Responding
to the market needs, ABAMCO developing Pakistan's first Shariah Compliant Index
Fund to be launched on the back of the recently announced Dow Jones- JS Pakistan
Islamic Index Fund under a licensing agreement with Dow Jones and JSCL. Another
product is recently launched which is a low risk capital protected fund UTP
Capital Protected Fund the fund is launched with a leading International
commercial Bank having an extensive branch network in Pakistan. ABAMCO is also
researching various concepts in the Income and Money market Fund categories.

When asked to comment on the concept of
Fund of the Funds, he said currently only two such funds are in the market one
of which initiated by ABAMCO. Outlining the concept of this fund, Najam said
actually this is a unique product and instead of investing else the managers of
this fund look at the performance of different funds and make their investment
in the fund of the funds. It is also in the initial stages and certainly capable
to harvest a rich crop in the days to come, he remarked.

MARKET SIZE

While commenting on the size of the
mutual fund regime in Pakistan, Najam said currently around 50 Mutual Funds are
in business while a few more are in he process to come on line. However this
sector was still in its early age when quantify its size it comes at 2.3 percent
of the GDP and hardly carries 5 percent of the total deposit base of the banking
sector.

One of the most significant factors, in
his point of view, was the arrival of the best human resource in this sector. He
said without any fear of contradiction that at present the asset management
sector has the cream of the available human resource in Pakistan. When asked to
give the reasons why high skilled manpower is being attracted by the Mutual
Funds? Well it is attributable to high ruminations and of course

Since he hails from SECP by virtue of
his past association, he had a soft corner for the commission and looked quite
positive about the role of SECP as the APEX regulator of the capital market.

PROSPECTS

Pakistan's mutual fund industry is
witnessing unprecedented growth owing to upturn in the country's economy and
being Pakistan's largest private sector asset management company. JS ABAMCO is
well poised to take advantage of this growth cycle. The sector shares
approximately 16.52 percent of the nation's total savings, a lot less compared
to other developing and developed countries, thus representing a huge potential
to grow even further. ABAMCO has some expansion plans with the objectives to:

Najam said that ABAMCO is intended to
launch itself globally by opening an international subsidiary to be based in
Dubai, with the permission of SECP. Initially this office would focus on
developing a very strong distribution network in the Middle East through the
foreign and local banks in the region. We expect our initial investors to be
focused on gaining exposure to our current product range focusing exclusively on
Pakistan owing to our credible corporate reputation and continued success in
delivering on promises. ABAMCO also intended to use Dubai as the base to
actively market Shariah complaint funds to a huge array of Shariah compliant
Fund Managers across the globe.

GULF REGION

Subject to approval by SECP and the
relevant regulatory authorities, JS ABAMCO will offer new products mentioned
below in Gulf Region: